Adeia Inc.'s (NASDAQ:ADEA) investors are due to receive a payment of $0.05 per share on 31st of March. This means the annual payment is 1.2% of the current stock price, which is above the average for the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Adeia's stock price has increased by 43% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
See our latest analysis for Adeia
Adeia's Projected Earnings Seem Likely To Cover Future Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Adeia was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 15.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of $0.92 in 2015 to the most recent total annual payment of $0.20. This works out to a decline of approximately 78% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend Looks Likely To Grow
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Adeia has seen EPS rising for the last five years, at 13% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Adeia Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think Adeia might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Adeia that investors should know about before committing capital to this stock. Is Adeia not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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